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The GCC’s Commercial Vehicle Market:
Trends and Opportunities
Automotive & Transportation Practice
Frost & Sullivan, Dubai
June 2015
Table of Contents
Commercial Vehicle – Sales Review 3 1
Mega Trends, Drivers, and Restraints 8 2
CV Market – Parc Profile 14 3
Spare Parts Market in the GCC for CVs 20 4
Key Takeaways 26 5
Commercial Vehicle – Sales Review
3
The Gulf Cooperation Council (GCC) Commercial Vehicles (CV)
Industry — Sales Trends
60,298
68,380 82,806
97,563 107,674 115,171
0%
5%
10%
15%
20%
25%
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2009 2010 2011 2012 2013 2014
Gro
wth
(%
)
Un
its
Car and Pickup Sales Growth Rate (%)
• Growth: 13.4 per cent (2009-2014)
• Y-o-Y growth: 7.0 per cent (2013/14)
• Coverage: Trucks and Buses
Source: Frost & Sullivan
Total Commercial Vehicles, Past Trends and Current Market, the GCC, 2009-2014
CAGR 13.8%
Market started picking up post 2008 and the recovery period witnessed highest growth
The GCC Total CV Sales 1. Used Vehicle imports was highest in the KSA, especially in the Heavy Commercial Vehicle category 2. Limited used vehicle imports in case of Buses across the GCC
The GCC CVs MARKET: USED + NEW VEHICLES, 2014
Commercial Vehicles include Trucks and Buses
** Includes Trucks, Buses, and Mini Buses (Mini Vans)
** Includes used and new vehicle sales
22%
78%
Old vehicle
sales 25,500
New vehicle sales 89,671
Total Market: 115,171 Units** • The total Light Commercial Vehicles (3.0 Tonne to <=9.0
Tonne Gross Vehicle Weight (GVW) market was 47,858
units in 2014 wherein, used vehicle imports is not
common in the GCC as this market is primarily dominated
by Japanese majors which are more cost effective than
the European counterparts
• In case of Medium and Heavy Commercial Vehicles (>9.0
Tonne GVW), the dominance of used vehicles was much
higher when compared with light vehicles.
− The total M&HCV market (new and used) was 67,313
units in 2014
− Major used vehicles imports witnessed in the Heavy
Commercial Vehicles (>16 tonnes GVW) category
• Imports of used vehicles were nearly 34.6 per cent in
trucks and 3.2 per cent for buses in 2014
Source: Frost & Sullivan
The GCC CV MARKET: USED + NEW VEHICLES, 2014
Source: Frost & Sullivan
• Sale of used vehicles is mostly in the heavy vehicle segment
• Light commercial vehicle segment does not have used vehicle sales due to
aggressive pricing of Japanese OEMs
LCV: 3.0 Tonne <GVW<=9.0 Tonne (Includes small pick up for goods carrier)
MCV: 9.0 Tonne<GVW<=16.0 Tonne
HCV: 16.0 Tonne<GVW
Break-up of Total CV Sales Medium and Heavy Commercial Vehicles (M&HCV) accounted for 58.5 per cent of the sales in 2014
41.5%
15.4%
43.1%
Total Market: 115,171 Units
LCV: 47,858
MCV: 17,710
HCV:
49,603
74.5%
25.5%
Overall CV Market: Truck vs. Bus (New Vehicle Sales) Trucks comprised 74.5 per cent share of the market, whereas buses accounted for the rest
The GCC CV MARKET: TRUCK vs. BUS, 2014
Source: Frost & Sullivan Analysis
• Sale of used vehicles is mainly in the heavy vehicle segment
• Light commercial vehicle segment does not have used vehicle sales due to aggressive pricing
of Japanese OEMs
Commercial Vehicles (CVs) include Trucks & Buses
** only new vehicles sales. Does not include used vehicles
** Includes Mini bus/Mini Van sales
Total Market: 89,671
Units** • Buses are normally
classified in more than
4-9 Tonne GVW (light)
and more than 9
Tonne GVW (medium
and heavy) category
• The Heavy Duty bus
segment generated
the maximum volume
in the GCC bus market
• The Light Duty Trucks segment
(below 9.0 Tonne GVW)
witnessed sales of 40,000 plus
units of vehicles, which was the
highest in terms of volumes
amongst new truck sales market
in the GCC
• Medium and Heavy Duty trucks
market (above 9.0 Tonne)
created a demand of 18,400 units
of trucks in the year 2014
• Almost 21,500 trucks, which were
imported in 2014, were used/old
trucks
Buses
Trucks
Mega Trends, Drivers, and Restraints
8
Factors Impacting CV sales The GCC’s economic drive is intertwined with robustness of crude exports and government
expenditures; these two factors are the major drivers of trucks sales
• In the absence of economic diversity, government expenditure and service sector control
every activity of the economy and factors like employment, income generation, and Imports,
which are the key drivers for Vehicle sales
Key Factors Impacting Vehicle Sales (Growth) in the GCC
Factors Impacting CV Sales (continued) Crude Oil Price is the most important factor controlling growth of economy in the GCC; a good
economic growth drives investments, resulting in higher CV sales
The other key factors enabling the growth of economy in the GCC and vehicle sales are:
• Government expenditure driving the economy
• Service sector growth and imports driving commercial vehicles sales
• Higher employment and economic growth increasing per capita income driving sales of vehicles
• Regression and correlation analysis of 28
key economic factors suggests Crude Oil
Price as the single most important factor
controlling growth of the GCC’s economy
and a good economic growth enables good
vehicles sales.
• Crude Oil Price has the highest correlation
coefficient of 0.9. Any changes in the crude
oil price is likely to impact the economy
positively or adversely. Numbers mentioned denote the
correlation coefficient
The GCC Commercial Vehicle Sales Drivers
Development of Bus
Rapid Transit System and
Metro Rail are likely to
drive demand for Buses
Increasing population
and per capita incomes
are driving higher
consumption of goods.
The GCC economy is
highly dependent on
imports. Any growth in
consumption pattern
demands growth in
transportation and
logistics activities,
resulting in higher
demand for trucks
Government expenditure in
infrastructure projects drives
the economy he GCC as well as
trucks sales
Source: Frost & Sullivan
The GCC Trucks and Buses Market: Key Market Drivers and Restraints, 2015-2020
Market Drivers and Restraints Increasing investments in the infrastructure segment will boost growth in the M&HCV Trucks and bus
market as well
Denotes long-term impact Denotes current impact
Driv
ers
Re
strain
ts
Driv
ers
Re
strain
ts
The GCC gover e t’s initiatives to increase
employment will
further boost the per
capita consumption
Increasing FIIs*
into the GCC will
further boost the
demand for
Commercial
Vehicles
The gover e ts’ ever
increasing emphasis on
industrialisation and
supporting growth in
manufacturing
Increased
government
spending on public
transportation
system
Heavy investments
planned by the
governments in the GCC
to support growth in
infrastructure segment
Growth of railway network will
hamper sales of long-haul vehicles
in the longer run Adverse climatic condition
keeps FIIs away into the
country for Industrialisation
Higher dependency on private
cars for local commuting is not
creating higher volumes for Bus
sales in the GCC market
*Foreign Institutional Investors?
Source: Frost & Sullivan
Investment in Parallel Systems (transportation) May Hinder the
Sales of Trucks in the Long Term
Public Transportation (Linear and Futuristic)
Investment in the rail sector, low cost airlines, transit system, and
metro railway can impact trucks and large bus sales. However, this
factor will impact the demand for trucks and buses in the next six to
seven years
Goods Transportation – The GCC Rail Project
The GCC is likely to promote further inter-country trade by speeding
up the Railway project completion by 2017-2018. This will affect
sales of long-haul vehicles negatively
Past Trends – Units in Operations (UIO) Close to 1.2 Million units of CV operational in 2014; fastest growth is expected in SCV* category
(CV of <3 Tonne GVW), which is not included here
15
Source: Frost & Sullivan Analysis
Commercial Vehicles UIO Trends, 2009-2020, the GCC
CAGR:
7.0%
CAGR:
7.2%
*Note: SCV = Small Commercial Vehicles (<3.0 Tonne GVW); LCV = Light Commercial Vehicles (3.0-9.0 Tonne
GVW); MCV = Medium Commercial Vehicles (>9.0-16.0 Tonne GVW); HCV = Heavy Commercial Vehicles
(>16.0 Tonne GVW); GVW = Gross Vehicle Weight; CAGR = Compound Annual Growth Rate
214 431
636
656
788
1,211
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2009 2014 2020
In T
ho
usa
nd
Un
its
LCV M&HCV
25.2%
19.1%
14.0%
10.0%
7.5%
6.2%
4.0%
3.0% 11.0%
40.1%
27.0%
11.0%
6.5%
7.4%
8.0%
OEM Share in UIO – By Vehicle Categories Isuzu and Mitsubishi have led the LCV* market with nearly 67 per cent share, whereas M&HCV** is
led by old imports (In new vehicles, Isuzu, Mitsubishi, and Mercedes are the market leaders)
16
* LCV – Light Commercial Vehicle
*** M&HCV – Medium and Heavy Commercial Vehicle
***Others include Tata, Daewoo, Ahsok Leyland, Scania, Dongfang, Foton, etc… Source: Frost & Sullivan Analysis
• Limited imports of used trucks in the LCV category
• In case of Medium and Heavy Commercial Vehicles (>9.0 Tonne GVW), the dominance of used vehicles was
much higher when compared to light vehicles
• Mercedes, Volvo, and MAN accounted for the maximum share in old imports – mostly imported from the
European Union (EU)
LCV, OEM-wise Parc, the GCC, 2014 M&HCV, OEM-wise Parc, the GCC, 2014
Isuzu
Mitsubishi
HINO
Hyundai
Toyota
Others***
Old
Imports
Isuzu
Volvo
MAN
HINO
Others
Mercedes
Mitsubishi
IVECO
Total:
430,951
Total:
788,305
25.4%
15.3%
30.2%
29.1%
Commercial Vehicles Parc – Age Break-up Vehicle age is increasing in the GCC as people are using vehicles for longer period
17
Source: Frost & Sullivan Analysis
• Growth at a CAGR of 7.2 per cent (2014-2020)
• 1.8 million commercial vehicles to be operational by 2020
• More number of vehicles in 10 years and above category in 2020 (3 per cent higher than 2014)
Vehicle Age Break-up, 2014, the GCC Vehicle Age Break-up, 2020, the GCC
0-3 years
Total:
1,219,256
4-6 years
7-10 years
>10 years
Average Age = 7.6 years
22.7%
23.2% 22.0%
32.1% 0-3 years
Total:
1,846,707
4-6 years
7-10 years
>10 years
Average Age = 8.0 years
Vehicle Parc Analysis by Tonnage Vehicles with GVW>16 Tonne comprise a market share of nearly 45 per cent
PARC, 1.2 Million Vehicles
Break-up by Tonnage, 2014
PARC, 1.8 Million Vehicles
Break-up by Tonnage, 2020
• Tractor Trailers are the highest selling application in the long-haulage heavy duty market
• The LCV and MCV market primarily creates a demand for rigid body application having end usage in intra-
city transport
• With the development of railway network, MCV segment will see more growth due to higher secondary
transport demand, while demand for HCV will decrease
Source: Frost & Sullivan Analysis
35.3%
18.3%
22.1%
21.5%
2.8%
3.0
Tonne<=
GVW< 9.0
Tonne
34.4%
20.2%
23.2%
19.6%
2.6%
40.0 Tonne
<GVW 25.0 Tonne
<=GVW<
40.0 Tonne
9.0 Tonne<=GVW<16.0 Tonne
16
.0 T
on
ne
<=
GV
W<
25
.0 T
on
ne
3.0
Tonne<=
GVW< 9.0
Tonne
40.0 Tonne
<GVW 25.0
Tonne<=GV
W< 40.0
Tonne
9.0 Tonne<=GVW<16.0 Tonne 16
.0 T
on
ne
<=
GV
W<
25
.0 T
on
ne
42%
30%
15%
13%
Vehicle Ownership Pattern LCV has the highest number of driver-owned small fleet, whereas M&HCV has 65 per cent fleet
operators as owners (lowest in the GCC)
19
Source: Frost & Sullivan Analysis
• LCV has the highest number of individual and small fleet operators
• Used truck import is very common in the GCC (especially in the >16 Tonne GVW category)
• These used trucks are imported by individual operators as well as small and medium fleet
companies. Distributors run various programmes to educate fleet operators to buy new vehicles
(especially in the 24 Tonne and above category)
• Regulation changes are likely to impact the market growth
LCV, Vehicle Ownership Pattern,
the GCC, 2014
M&HCV, Vehicle Ownership Pattern,
the GCC, 2014
Driver
Owners
Small Fleet
Medium
Fleet
Large Fleet
65%
35%
Fleet
Owner
Individual
Owner and
Small Fleet
Spare Parts Market in the GCC for CV
20
Growth
USD 3.38 Bn
(2014)
USD 5.49 Bn
(2020)
(9.8%)
Market Stage Market Revenue
Market Size for
Last Year of Study
Period
Base Year Market
Growth Rate
Spare Parts Market The total spare parts market for CV was USD 3.38 Billion (Bn) in 2014, which is likely to reach
USD 5.49 Billion by 2020
21
Note: All figures are rounded
CV Auto Components Market: The GCC, 2014
Source: Frost & Sullivan Analysis
8.4% Not Applicable
(per cent of market share held by
top three companies)
More than 200
(active market competitors in
base year)
Forecast Period
Market Growth
Rate
Market
Concentration
Number of
Competitors
(CAGR, 2015-2020)
Stable Increasing Decreasing
(2014)
Spare Part Demand (Continued) Maintenance and Mechanical Parts account for 71 per cent of the market; high demand of collision
parts in the UAE, the KSA, and Kuwait
• The key Servicing and Maintenance
parts include Filters, Spark Plugs, Belts,
Brakes Shoes/Li i gs….. • High difference in mileage run by type
of commercial vehicle
• Spare Parts Likely to witness 5-8 per
cent increase till 2018, and might
reduce thereafter due to the GCC rail
transport project
• In a country like the KSA, nearly 40 per
cent vehicles operate without insurance
Source: Frost & Sullivan analysis
42%
28%
30% Maintenance
Collision
Mechanical
CV, Percentage Sales Breakdown by Type of
Auto Components, the GCC, 2014
Key maintenance parts: Bulbs, Plugs, Shoe and Lining, Belts, Filters
Key mechanical parts: Pumps, Alternator, Thermostat, Starters, Absorber
Market Forecast for Spare Parts CAGR of 8.4 per cent to reach USD 5.49 Billion in 2020
Commercial Vehicles Spare Parts Demand Forecast, 2014-2020, the GCC
2.05
3.65 0.80
1.00
0.53
0.84
-
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
2014 2020
In U
SD
Bil
lio
n
The KSA The UAE The RoGCC*
Total: USD 3.38 Bn
Total: USD 5.49 Bn
CAGR:
8.4%
*The RoGCC = Rest of the GCC
Channel Analysis Six routes exist for supply of parts in the GCC aftermarket with increasing competition from branded
and other aftermarket parts
Parts Supply
Genuine
Parts
Branded Aftermarket
Parts
Other Aftermarket
Parts
Imports
Counterfeit
System Suppliers
Example:
Bosch Chassis Systems supplying
brake components
Note : OES – Original Equipment Spares
OE Parts – OE fitted brands supplied in independent aftermarket
Alternate parts – Brand other than OE brand supplied in the independent after market
Spurious – Products which are not original and branded as original popular brands in the market
Imports – It includes domestic imports, which means a part directly gets imported from the country of origin without involving
local operations of Genuine Parts supplier
System suppliers – Supply brand under their name, for example, Bosch braking products
Domestic Imports
Source: Frost & Sullivan analysis
Channel Analysis Aftermarket Structure for Parts Supply (Can be represented differently for different countries in the GCC)
25
Service
Channel
Dealer / Distributor
Counter
Sales Wholesale
Customer
OES / OEM Partner
Sub WS Retailer Fleet /
Garage Export
OES Second
Brand OE Parts Non-genuine
Domestic
Imports
Distributor / Importer
Sub WS Retailer Export
Retailer Fleet /
Garage
Customer
Source: Frost & Sullivan Analysis
Parts Suppliers
Tier-2 Tier-4 Tier-1 Tier-3 Customers Tier-5 Exports
Retailer Fleet /
Garage
Fleet /
Garage
WS = Wholesaler
Key Takeaways
26
• Growing Parc = 1.22 million (2014) to 1.85 million (2020) – CAGR
of 7.2 per cent
• Dominance of Japanese OEM = LCV and European
OEM = M&HCV
• Average vehicle age likely to increase – Expected to reach eight
years by 2020 from present level of 7.6 years (2014)
• Growing Auto Components Market = USD 3.38 Billion (2014) to
USD 5.49 Billion (2020), at a CAGR of 8.4 per cent
• The KSA is the largest market in the GCC (followed by the UAE).
The KSA is dominated by used truck imports in the heavy trucks
category, while import of used trucks is limited in rest of the GCC
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This White Paper prepared by Frost & Sullivan is based on analysis of secondary information and
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Thank you for your attention!
Subhash Joshi
Associate Industry Director,
Automotive & Transportation Practice
Frost & Sullivan
E-mail: [email protected]
Mobile: +971 567686450
Paroma Bhattacharya
Corporate Communications,
Frost & Sullivan
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